Watchdog to formally probe KPMG audit of troubled bank

KPMG’S work on the Co-operative Bank’s accounts will be formally investigated, the Financial Reporting Council said yesterday.

The watchdog said it will probe KPMG’s approval and audit of the Co-op Bank’s 2012 results, following the bank’s revelation last year that it had a £1.5bn capital hole.

The FRC, which has powers to fine and suspend accountants, said in November that it was looking into the bank’s financial reports.

“Given the issues which the bank has experienced in recent months and in the light of the high media profile and public interest associated with these issues, it is understandable that there should be appropriate regulatory scrutiny,” said KPMG in a statement, adding that it will co-operate fully.

It is thought that auditors involved in signing off the Co-op Bank’s accounts will remain in post while the probe is carried out. Andrew Walker, the bank’s lead auditor, and Co-op Group auditor Jonathan Hurst defended their work at the Treasury Select Committee last month.

The Financial Conduct Authority and the Bank of England’s prudential regulation authority are also reviewing the bank.